Softbank Vision Fund Attracts $93B From Gulf States, Apple, Others

By David Jones
May 22, 2017 2:23 PM PT

The
Softbank Vision Fund on Saturday announced that it had closed its first major funding round raising more than US$93 billion in capital from the Gulf states, as well as tech stalwarts Apple, Qualcomm and others.

Softbank, which last fall launched the fund with backing from the Public Investment Fund of Saudi Arabia, said it has received new commitments from the Mubadala Investment Fund from the United Arab Emirates.

The Softbank Vision Fund, which has targeted a $100 billion close within six months, also received commitment pledges from Foxconn and Sharp. Softbank increased its original commitment of $25 billion to $28 billion. Saudi Arabia has pledged to commit $45 billion to the fund.

Coincidentally, the announcement came while the Saudi Royal Family was hosting Donald Trump on his first overseas trip as U.S. president. During his visit, Trump announced a massive arms deal with the Saudis, and they agreed to make major investments in the U.S.

Softbank Chairman Masayoshi Son previously met with Trump during the presidential transition period, following the fund's launch.

Softbank has adopted a long-term investment strategy, Son indicated, noting that solving many of the world's current problems would require "patient long-term capital and strategic investment partners" with the resources to nurture that success.

Softbank has long made investments in transformative technologies and has supported disruptive entrepreneurs, he said.

The fund plans to take majority and minority stakes in public and private firms, ranging from startups with new technologies to established companies needing substantial funding for growth.

Fund Structure

The fund will be advised by wholly owned units of SBG, known collectively as "SB Investment Advisers," and will be led by Rajeev Misra, who will serve as chief executive of SB Investment Advisers. Misra will play a critical role in all fund transactions, with support from a highly experienced international team. Offices will be located in London, San Carlos and Tokyo.

Nizar Al-Bassam and Dalinc Ariburnu of newly formed Centricus, which advised on structuring the fund and raising capital, will continue advising the fund.

The fund will have the right to buy certain investments already acquired by Softbank, including 24.99 percent of its holding in ARM, as well as investments in Guardant Health, Intelsat, Nvidia, One Web and SoFi.

The fund will invest in various countries around the world and will not focus particularly on the U.S. or any other single country.

Demand for Capital

The Softbank Vision Fund announcement reflects the growing demand for capital needed to get new ideas off the ground, while at the same time, a lot of funding has been sitting on the sidelines, in pursuit of the right vehicle.

"There is a growing sense that the next information technology paradigm is overdue and being delayed due to a lack of capital," remarked Michael Jude, a program manager at Stratecast/Frost & Sullivan.

The Trump administration has signaled a willingness to work with businesses to accelerate technology, particularly if it helps grow U.S. employment, he told the E-Commerce Times.

Softbank is betting on its ability to "leverage a more friendly economic tax and political environment," Jude said.

Large amounts of sovereign wealth and corporate cash have been bottled up over the last several years, observed Paul Teich, principal analyst at Tirias Research.

Both Apple and Qualcomm have set aside large cash reserves, he told the E-Commerce Times.

"This deal enables those companies to place large bets without having a huge direct impact on individual funding rounds," Teich said.

Emerging services that have a physical component, particularly transportation, need to scale fast in order to be competitive, and hardware is still very difficult, he noted.

A company that wants to build a new chip requires a baseline of $100 million, Teich said. A firm that wants to build an IoT sensor platform has to build and deploy a lot of devices during the alpha and beta phases in order to get enough data to feed into deep learning analysis.

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.